Brad Stone: ‘We should watch Uber and Airbnb closely’

The author of new book The Upstarts on how the new breed of tech startups changed the rules of the game

At the start of the book you note that the dictionary definition of an upstart is either a newly successful person or someone who does not show proper respect to the established way of doing thingsI wanted to frame the defining question of the book for the reader. Are these brilliant entrepreneurs who have built tremendous businesses through sheer creativity and ingenuity? Or are they renegades that grew in large part through contempt for the status quo? Theres an ambivalence that surrounds companies like Uber and Airbnb, and I think this question over their identity and the dual meanings of the word upstart gets to the heart of it. My own squishy answer, of course, is that they are a little bit of both.

Youve written about Silicon Valley for more than 20 years have we reached peak Valley yet?In terms of the business impact, I dont think so. Theres a new set of transformative technologies such as machine learning, AI and virtual reality that will spawn another set of big tech franchises. But in terms of cultural impact, perhaps we are at peak Valley. For decades, technology entrepreneurship has been revered, and people like Steve Jobs and Elon Musk were heroes. Now we have to contend with lost jobs due to automation, the effects of digital addiction and simple fatigue with all this constant change. So perhaps our feelings toward Silicon Valley are about to get a lot more complicated.

You met some of the individuals who had similar startup ideas to Uber and Airbnb but didnt become billionaires. Have these people been able to move on and were they reluctant to be featured?I call these companies the non-starters. They had the same ideas but were too early, or too nice, or too idealistic. They all shared a strain of wistful regret; it is difficult to see someone else execute the same idea and win unimaginable success and riches. The best story was the founder of a company called Seamless Wheels a pre-Uber limo service who abandoned the business after getting a death threat on his voice mail, probably from a limo fleet owner.

Whats the best call Travis Kalanick has ever made?Surrendering in China in an expensive battle with local rival, Didi Chuxing. Last year Uber lost $2bn trying to win that market; Kalanick couldnt bring himself to sacrifice his dream of building a truly global network. But the rules of competition in China will always favour the local champion and Didi, it turned out, had the same access to capital as Uber. By stepping away from the fight, Uber not only saved its balance sheet from more destruction but negotiated an impressive 17% stake in its rival.

And the best call Brian Chesky has made?Branding the Airbnb user base as a community. For years before Airbnb, people posted their homes and spare rooms on the internet (via sites like Craigslist and Couchsurfing.com). Chesky and his colleagues drummed up an evangelical spirit to their endeavour and held meet-ups and, in later years, global conferences of hosts. It got Airbnb users to feel part of something larger and strengthened their ties to the company, even when it meant that they were violating provincial laws.

In most territories these firms operate outside of laws and regulations around minimum wages, health and safety, and tax collection has exploiting these loopholes been key to their success?Absolutely just as Amazons navigation of its sales tax obligations was key to its success over its first decade. With tough interpretation of taxi and zoning regulations, neither Uber nor Airbnb would have gotten started. By the time many cities recognized their existence, both were fairly large and had the political support of their customers.

After publication of your book about Jeff Bezos and Amazon, Bezoss wife gave the book a one-star review on Amazon Were you surprised?I can still remember the moment I saw it my coffee cup froze midair in my hand, my mouth configured itself into an expression conveying shock and confusion. Jeffs wife had never made such a public statement before related to the depiction of Amazon. And she was alleging serious mistakes in the book yet listed only one relatively trivial one. I think it might be the most prominent product review in the grand history of Amazon! Of course in the long run, perversely, it did nothing but boost the books prominence and turbo-charge sales.

Did you witness much sharing in the sharing economy?Certainly some hosts on Airbnb are opening up their spare bedrooms to meet new people; and some drivers use Uber to carpool with strangers for the companionship. But the most productive members of each community are professional operators, making available their homes or cars as a way to earn or supplement a living. Its not the sharing economy at all, though that phrase has been useful for the companies to bolster their image.

Which sectors have been able to embrace upstarts disruption with any success?The auto industry. Upstarts like Tesla have achieved enormous success but havent slowed down the car companies 2015 was their best year ever. The auto giants are all researching autonomous vehicles alongside the likes of Google and Uber and they could conceivably get there first. The real estate market has also remained fairly impervious to disruption, as well as (to everyones consternation) the airline industry. Perhaps an industrys immunity is related to the size of each individual transaction.

You state that the founders of Airbnb and Uber are very different from Bill Gates, Larry Page and Mark Zuckerberg How?For all their strengths, Gates, Page and Zuckerberg are not charismatic communicators or storytellers. They generally avoided the press and focused their attentions inward. Chesky and Kalanick couldnt get away with that. Early on, they faced regulatory fights that their predecessors never encountered until much later. This took skills like mustering political coalitions, enlisting the support of customers and testifying publicly. They had to be politicians, as well as innovators and managers.

Are the fortunes and efficiencies created by these companies worth the price paid by the disrupted?I think so as long as they follow on their promises. Uber has pledged to reduce or eliminate traffic in major cities within five years and to treat drivers more equitably. Airbnb thinks it can create a new industry where people are paid to provide authentic travel experiences. It has also set out to eradicate racial bias from its platform. Lets watch these companies closely and make sure they achieve their goals, instead of replacing one set of distant, dominant companies with another.